Aetna Agrees to Buy Coventry in $5.7 Billion Deal

Aetna announced on Monday that it would buy Coventry Health Care for about $5.7 billion in cash and stock, a move Aetna said would help it expand further into government-backed programs like Medicaid and Medicare.

It is the latest deal in an industry that has been spurred to seek consolidation in part because of the Obama administration’s sweeping expansion of health care coverage.

Last month, WellPoint agreed to buy Amerigroup for about $4.9 billion, in a deal that increased WellPoint’s presence in the markets for Medicare, for older patients, and Medicaid, for low-income patients. DaVita, Cigna and the private equity firms BC Partners and Silver Lake have also struck multibillion-dollar deals.

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But Aetna’s acquisition would be the biggest in the managed health care industry since the Affordable Care Act was signed into law in 2010. Under the terms of the deal, Aetna, based in Hartford, will pay $27.30 in cash and 0.3885 of a share for each of Coventry’s shares. At Friday’s prices, that amounts to $42.08, a 20 percent premium over Coventry’s closing price last week.

“Integrating Coventry into Aetna will complement our strategy to expand our core insurance business, increase our presence in the fast-growing government sector and expand our relationships with providers in local geographies,” Aetna’s chief executive, Mark T. Bertolini, said in a statement.

Aetna’s shares were up 5.6 percent, to $40.18. Shares in Coventry climbed to $42.04.

Coventry, based in Bethesda, Md., offers a variety of insurance services, including government-financed programs. It earned $543.1 million last year on revenue of $12.2 billion, and its shares rose 17.5 percent in the 12 months before the deal was announced.

Aetna said the deal was expected to close by the middle of next year, and would lead to around $400 million of annual cost savings by 2015.

Aetna’s move was widely praised. Analysts at JPMorgan Chase wrote in a research note on Monday that Coventry would enhance the company’s presence in markets like Florida, Kentucky and western Pennsylvania.

They added, however: “While certainly enhancing, we don’t see this as a game changer in terms of government focused capabilities for Aetna going forward.”

Goldman Sachs, UBS and the law firms Davis Polk & Wardwell and Jones Day advised Aetna on the deal, while Greenhill & Company and the law firms Wachtell, Lipton, Rosen & Katz; Bass, Berry & Sims; and Crowell & Moring advised Coventry.

A version of this article appears in print on 08/21/2012, on page B4 of the NewYork edition with the headline: Aetna Agrees to Buy Rival In Deal Worth $5.7 Billion.